a) With the aid of a diagram, explain how an ordinary monopoly that sells its output at a uniform price, having a total cost function TC=c•Q (where c,0), could earn total revenue that equal the entire area under the market demand curve, leaving customers with no consumer surplus. b) If an ordinary monopoly firm could indeed capture the entire consumer surplus, with the aid of a diagram, indicate graphically the firm’s output and the uniform price at which the firm would sell its product in order to maximize profit.

a) With the aid of a diagram, explain how an ordinary monopoly that sells its output at a uniform price, having a total cost function TC=c•Q (where c,0), could earn total revenue that equal the entire area under the market demand curve, leaving customers with no consumer surplus. b) If an ordinary monopoly firm could indeed capture the entire consumer surplus, with the aid of a diagram, indicate graphically the firm’s output and the uniform price at which the firm would sell its product in order to maximize profit.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter14: Monopoly

Section: Chapter Questions

Problem 14.9P

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